Japan holds rates in surprise move

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AFP

Japanese shares were down on Thursday as investors’ hopes for monetary easing from the central bank were dashed.

The Bank of Japan held rates unchanged despite coming under pressure to take further action.

It had cut interest rates to negative in January but this failed to provide a much needed boost for the economy.

The Nikkei 225 fell by 2.9% to 16,781.69 points. New economic data also showed a slip back into deflation while industrial production expanded.

Japan has for years been trying to boost its economy and end a period of stifling deflation.

One way to try to achieve this is by monetary policy, which is one of Prime Minister Shinzo Abe’s three key “Abenomics” policies to turn around the economy.

But even negative rates – meaning commercial banks will be charged if they deposit money with the central bank – have not trickled down to get banks to lend more and companies and people to invest or spend more.

Inflation is still far off the 2% target.

The BOJ decision to hold rates also sent the yen currency soaring, which is likely to negatively affect the crucial export sector.

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Thinkstock

The three arrows of “Abenomics”:

• 
  The monetary arrow: expansion of the money supply to combat deflation


• 
  The fiscal arrow: increased government spending to stimulate demand in the economy


• 
  The structural arrow: structural reforms to make the economy more productive and competitive

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In China, the mainland’s Shanghai Composite fell 1.2% to 2,919.80 points while Hong Kong’s Hang Seng was flat at 21,384.61.

In South Korea, the benchmark Kospi index lost 0.6% to 2002.30.

Earlier in the morning, the country’s tech giant Samsung reported a 12% rise in operating profit, beating analyst forecasts.

In Australia, Sydney’s ASX/200 defied the wider trend and rose by 0.6% to 5,218.20.

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